Question

Cloud company has 5,000 shares of 6%, $20 per value non cumulative preferred stock outstanding. The company also has 8,000 shares of $10 per value common stock outstanding. Cloud paid no dividends in yEAR 1 OR year 2. In Year 3, Cloud paid $30,000 of cash dividends. what was the amount of dividnes paid to preferred stockholders

Answer 1

The amount of dividends paid to preferred stockholders is 300 shares.

Step-by-step explanation:

To calculate the amount of dividends paid to preferred stockholders, we need to know the number of preferred stock outstanding and the dividend rate. In this case, the Cloud company has 5,000 shares of 6%, $20 per value noncumulative preferred stock outstanding.

To calculate the amount of dividends paid to preferred stockholders, we'll multiply the number of preferred stock shares by the dividend rate:

Amount of dividends paid to preferred stockholders = Number of preferred stock shares x Dividend rate

Amount of dividends paid to preferred stockholders = 5,000 shares x 6%

Amount of dividends paid to preferred stockholders = 5,000 shares x 0.06

Amount of dividends paid to preferred stockholders = 300 shares

Answer 2

The amount of dividends paid to preferred shareholders is $18,000

Step-by-step explanation:

Ultimately, the preferred shareholders were owed dividends for year 1 and 2 ,as a result the dividends paid in year 3 is for outstanding preferred shareholders' dividends for earlier two years including year 3 dividends, with a balance going to common shareholders.

Total dividends $30,000

Preferred shareholders outstanding dividends

(5000*$20*6%*2 years) ($12000)

Current preferred dividends(5000*$20*6%) ($6000)

Common dividends $12,000

The total dividends paid to preferred shareholders is $18,000($12000 outstanding dividends plus $6000 current year dividends)